Demand growing for ESG fixed income solutions in Asia
HSBC Global Asset Management is looking to raise US$750 million for an emerging market green impact bond fund
Environment, social, and governance (ESG) equity investment product solutions have attracted a lot of interest from Asian investors since ESG investing became a popular trend.
But more recently, demand for fixed income ESG product solutions has also been growing as more investors seek to diversify away from equities in a highly volatile market.
In line with this trend, HSBC Global Asset Management (HSBC GAM) is currently fundraising for an emerging market green impact bond fund that it hopes to raise a total of US$750 million for by the end of November. This fund already has the International Finance Corp (IFC) as one of its anchor investors.
Previously, HSBC GAM had launched a low carbon bond fund in September 2017 that raised US$230 million in assets under management (AUM). This core global credit fund aims to create a portfolio that has a lower carbon footprint than its reference benchmark Bloomberg Barclays Global Aggregate Corporates Diversified Index Hedged USD.
“Fundamentally what ESG is all about is thinking more broadly about the issues that a company has to deal with in its everyday business. We are doing two things. One is we identify these issues, find out if they are material, and whether we bring them into the investment process. We ask if the fund manager is making a better-informed decision and is aware of these ESG issues. And then the second thing we do is we offer specific solutions,” says Sandra Carlisle, head of responsible investment at HSBC GAM.
HSBC GAM recently received an A-plus rating in almost all relevant areas from the Principle of Responsible Investing (PRI), the international network of ESG investors supported by the United Nations. The A-plus rating corresponds to a top quartile ranking. This is considered a significant achievement particularly in fixed income, where less than 10% of asset managers are awarded A+ rating.
“This achievement is particularly notable given the rapid improvement we have made as an organization. While we reached an A-plus rating for our equity strategies in 2018, we have also aimed to improve our A rating in fixed income,” Carlisle says.
The improvement in its PRI rating for fixed income resulted from the following structured approach:
* Formation of a fixed income ESG committee to manage high-risk transactions and ensure its ESG approach is embedded across the platform in all capabilities;
* Training and increasing awareness for all global research and investment teams, including workshops, to enhance overall ESG expertise and quantitative work substantiating the importance of ESG criteria in credit investing; and
* Increased engagement in active dialogue with companies across the capital structure to understand how they manage material ESG issues to future-proof their business strategies, and with regulators and policy makers on systemic sustainable investment issues.
HSBC GAM’s equity ESG solutions have attracted interest from Asian investors, particularly the low carbon equity strategy launched in September 2017 which has raised US$33 million in AUM.
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